People filing for bankruptcy in Florida can typically protect their homes. In some bankruptcy filings, they may be subject to asset liquidation requirements. However, Florida exemptions can protect accrued home equity.
Other types of bankruptcy do not require the liquidation of property and therefore do not endanger homeownership during Florida proceedings. What do people considering bankruptcy need to know about protecting their home equity when they file?
Chapter 7 filers
Some people call Chapter 7 bankruptcy “liquidation bankruptcy.” The courts may require that people sell some of their assets to repay their creditors before they are eligible for a discharge of their qualifying debts.
Fortunately, Florida exemptions allow for the protection of all home equity as long as the parcel attached to the primary residence is not too large. If the parcel is less than 0.5 acres within municipal limits or 160 acres in the countryside, all of the filer’s equity may be exempt in a Chapter 7 bankruptcy case.
How long the filer has lived in Florida and owned the home may determine if they are eligible for the full exemption offered under state statutes. Generally, those filing Chapter 7 bankruptcy in Florida must have lived in the state for at least two years before the filing. They also need to have owned the home for 1,215 days (which is roughly three years and four months).
Chapter 13 filers
For homeowners on large parcels, those who recently moved to Florida and those who recently moved to a new home, Chapter 7 bankruptcy could leave some home equity at risk. Others may not even qualify for Chapter 7 proceedings due to their above-average income.
In such cases, a Chapter 13 bankruptcy may be the best option. Chapter 13 proceedings do not require any asset liquidation, allowing filers to preserve the entirety of their interest in the home. Additionally, the process of negotiating a repayment plan could make it easier for the filer to obtain a mortgage modification from their lender.
Florida residents concerned about their finances and preserving their home equity can benefit from legal guidance as they consider their bankruptcy options. Understanding how Florida statutes protect home equity can help people feel confident about filing for personal bankruptcy.